FY22 Result: Metcash (ASX:MTS) Share Price Climbs 7%

The Metcash Limited (ASX:MTS) The stock price is in focus today after wholesale distributor and hardware stock ASX announced its FY22 earnings.

Metcash supplies a number of independent retailers such as IGA, Foodland, Cellarbrations, The Bottle-O, IGA Liquor, Duncans and Thirsty Camel. It also owns Miter 10, Total Tools and Home Timber & Hardware.

Highlights of FY22 Results

Here are some of the key highlights of the company’s 2022 fiscal year:

The main driver of the result was equipment, which saw its EBIT increase by 40.7%, reflecting profit growth across its businesses, thanks to high residential construction activity and increased contributions to profits.

The food pillar saw EBIT increase by 4.1% and alcoholic beverages EBIT increased by 9.8%, reflecting “continued robust demand” in the retail network and a recovery in on-site sales following the easing of COVID trade restrictions.

New distribution center

The company has announced a new 115,000m distribution center which will replace its existing 90,000m distribution center in Laverton for Victoria. This will contribute to the competitiveness of independent retailers, create greater efficiency and provide access to a wider product range.

Outlook

Metcash revealed that strong sales momentum continued in FY23 through the first seven weeks, with total sales up 8.6%. Food sales increased by 5%, hardware sales increased by 19.8% and alcohol sales increased by 8.6%.

The company said there was still a strong pipeline of home building and renovation activity, which should help the hardware turn a profit in the first half of FY23.

However, the company noted that there is uncertainty about the impact of high inflation on consumer behavior.

My Opinion on Metcash Stock Price

It’s promising to see the progress the company has made over the past two years, and the strength continues. Profits are unlikely to increase every year once there’s a construction slowdown, but I’m impressed with what he’s doing right now.

For me, this is one of the most defensive ASX dividend stocks. Since its multiple earnings valuation is a bit lower than Wesfarmers Ltd (ASX:WES), a somewhat comparable company, I think Metcash is worth having in a blue chip focused portfolio.